The Economic Situation:
The Long Crisis of the Capitalist Economy

Oct 23, 2013

The following article was translated from the December 2013-January 2014 issue of Lutte de Classe (Class Struggle), the political journal of Lutte Ouvrière, the revolutionary workers organization in France.

The capitalist economy has not gotten out of the current crisis, which started off from the financial crisis in 2007 and 2008. Not only has the long recession of the 1970s become the form under which global capitalism has since existed, but in the succession of recessions and temporary recoveries, the recession phases have tended to be longer and more serious while the recovery phases did not actually mean recovery. This aspect is perfectly illustrated by the last five-year period during which the collapse of the banking system was avoided, but in which there has not been any true rebound of productive activity.

The most meaningful indicator showing how incapable the economy is of finding its way out of the crisis—and also the most important from the point of view of the exploited classes—is that the unemployment rate is much higher now than before the crash in almost all the industrialized countries, in particular in the richest imperialist countries of Europe and America. The recession is even revealed in the statistics on GDP (gross domestic product), even though they don’t distinguish between production and services—even the most useless ones—or between the growth of actual wealth and the skyrocketing of artificial wealth coming from speculation, for example, in the real estate sector.

In the year 2013, the Euro Zone did not return to the level of production it had at the beginning of 2008. There are 7.8 million more unemployed in the entire region. But some countries show an even bigger catastrophe: Portugal’s economy has gone back to where it was ten years ago, and Greece’s, twelve years!

In the capitalist economies during Marx’s time, the economic crisis played a regulating role, adapting the capacities of capitalist production, which seemed to grow limitlessly under the pressure of competition, down to the level the market could absorb. This regulation has always been anarchic, intervening afterwards and leading to a huge waste of material goods and workforce.

Once the lowest point of the crisis was reached and the surplus production eliminated from the market, with the profit rate beginning to go up again, a new recovery would take shape: investments would increase again; hiring as well. Since unemployment would go down, consumption could begin to increase.

After a period starting at the end of the 1960s when the rate of profit tended to fall, it began to rise again in the middle of the 1980s.

Since this turning point, the rate of profit has remained at a high level, even if there were short-term variations. But this increased rate of profit was reached almost exclusively through increased exploitation. Of course, we are talking here about the overall rate of profit. It does not say anything about how the profit is distributed between the companies in expanding sectors and those that are declining or are going bankrupt or are being absorbed by others. It doesn’t say anything either about the way profit is distributed between big and small businesses or, above all, between productive activity and finance.

Over a long period of time, the respective share of wages and capital incomes has continued to shift, with capital getting an ever bigger share of the national income at the expense of wages. And this is only one aspect of how things have evolved at the expense of the exploited classes.

From the end of World War II until the beginning of the crisis in the 1970s, the bourgeoisie in the developed imperialist countries, and especially in the European countries, awarded a whole series of advantages to the union apparatuses and bureaucracies, which became ever more integrated through a multitude of positions in a multitude of bodies. The bourgeoisie also conceded some social benefits to relatively large layers of the working class, in particular to what Lenin had called in his time “the aristocracy of labor”—such as access to education, and sometimes free access; retirement rights; health care coverage; or different kinds of “social benefits,” to which may be added state management of public services serving the whole working class (public hospitals, public transportation, and so on). These benefits may have been limited, but they did, however, improve the condition of the working class.

In the aftermath of the war, the bourgeoisie conceded such gains to the working class in great part due to the fear that World War II, like World War I, would be followed by revolutionary upheavals.... The relative economic growth for about twenty years ensured the (temporary) durability of those concessions. And those concessions to the working class ensured a sort of social stability in the imperialist countries, for the most part financed by the plundering of the poor countries and the overexploitation of the proletariat in these countries.

1970s: Beginning of the Takebacks

As early as the 1970s, facing the slowdown of its economy and recurring recessions, the bourgeoisie started trying to take back the gains it once had conceded to the laboring classes. All sectors have been hit by setbacks: education is less and less free of charge, and so is medical care; people are reimbursed less for their medication; the retirement age has been raised and the amount paid in pensions has been lowered; there is less adequate care for the disabled, and sometimes even no care at all for some of them, etc. All of this weighs on the living conditions of the exploited. This is the result of a long term evolution—facilitated by the weakening of the labor movement—which the bourgeoisie will not reverse unless it feels threatened again.

The direct consequence is that inequality has never been this great—or at least not since the 1920s and the speculative madness which preceded Black Thursday in 1929. An October 2013 report by Crédit Suisse bank, after noting that the property-owning classes have set an all-time record in global wealth, also observed that, given increasing incomes, the gap was becoming wider and wider between the highest and the lowest incomes.

On one side, the wealth of a limited number of billionaires is reaching peaks and the number of millionaires considerably increasing; on the other side, the number of those who fell below the poverty line, even in the richest countries, is also setting records. Even the dry language of statistics clearly shows that the relationship between classes continues to evolve in favor of the bourgeoisie.

While the notion of a “poverty line” gives only a general indication where things are heading and does not allow much comparison between countries, it at least makes some sense within one country. In the case of France, the line is set at 977 euros a month. According to the French national statistical body, 8.7 million people in the country have less than 977 euros a month to live on. In other words, pauperization is hitting not only the unemployed, but also part of the retired population and a notable portion of the workers who do have a job. This pauperization, due to the very mechanism of the crisis of the capitalist economy, is getting worse with the virtual freeze or sometimes cut in benefits as well as with the constant increase of extra expenses resulting from cutbacks in healthcare and benefits in general.

Rising unemployment has reconstituted, even in the imperialist countries, the “reserve army of labor” that Marx had talked about, giving the bourgeoisie the means to bear down on wages and working conditions of the whole proletariat.

Financialization

No matter how the rate of profit may have recovered, only a part of those profits have been going back into production. Productive investments have remained very low over a long period. This expression, “productive investment,” itself now means a lot of things—it could mean buying up other companies, even speculative purchases of other companies to cut them into pieces and sell them, and even mere financial “investments.” But while these sorts of “investments” help increase the concentration of capital, they do not lead to any development of production or employment. The concentration of capital has almost always meant “restructuring,” that is, the loss of production capacities and above all massive layoffs.

The various forms of speculation fostered by an inflating financial sector are nothing new by themselves. Speculation is as old as capitalism, and it is one of its features. Waves of speculation have often preceded and accompanied a crisis in the capitalist economy. But capitalism today is marked by the extreme length of the period during which finance seems to have detached itself from productive activity, led its own existence, incessantly creating new and ever more convoluted instruments. And capitalism is simultaneously characterized by the consequences that this long duration has imposed on the entire economic life.

Since the beginning of the imperialist stage of capitalism, private as well as public stocks and bonds have been the main speculative instruments, to which was added wide-scale speculation on exchange rates ever since gold was no longer the essential means of payment in world trade. The new financial products created in the last two or three decades have mostly been based on the idea that they should work as protection against the risks of losses linked to speculation. Combinations can be endless: an investor can even get insurance protecting himself from the unreliability of his insurance, and so on. But all these insurance notes can be exchanged, bought or sold, and they then become instruments on which it is possible to speculate. A tiny variation in a stock or bond price or in an exchange rate may thus be multiplied several times over and changed into a financial storm.

The fact that financial profit has become more valuable than profit made in production has created a suction pump moving an ever increasing share of capital towards finance, creating a self-reinforcing financialization. This is the profound consequence of this whole evolution.

More important even, financialization is pervading all economic life, modifying it at every level. The period of increased financialization took off in the beginning of the 1970s when the links were broken between gold and the dollar, ending the so-called Bretton Woods international monetary system. Financialization’s duration has had a marked and irremediable impact on the capitalist economy. Even before the collapse of the international monetary system and the introduction of floating exchange rates, the introduction of the “Eurodollars” had already paved the way to financialization; the first major expression of it was the trading in petrodollars.

Increasing financialization has profoundly affected the management of companies, which more and more were directed toward increasing the price of their shares in the stock exchanges. It modified the links between the different sectors of the economy: for example, the demand for raw materials has been altered by the fact that it is less and less connected with the need of industry and more and more linked to the erratic movements of speculation.

Banker and former board member of the Financial Markets Authority (AMF), Jean-Michel Naulot, in his book on the financial crisis, observed: “Whether talking about energy, metal or agricultural products, the respective markets remain highly volatile. How to forget the exaggerated episode of the years 2007-2009 during which the price of oil doubled in a year—from 70 dollars a barrel in July 2007 to 145 dollars in July 2008—before being divided by three in the following months, to 40 dollars in March 2009? Without any exception and whatever the product, all raw materials have more or less followed this evolution.”

A New York Times inquiry described how a major bank like Goldman Sachs not only speculates on a rise in aluminum prices, but it triggers the very rise on which it later bets. At the time of the study, the bank itself kept in storage one-fourth of the aluminum available on the world market. The Times declared: “Interfering with the prices of oil, wheat, cotton, coffee, or other markets has yielded billions of dollars to investment banks like Goldman, JP Morgan Chase or Morgan Stanley, and meanwhile, it has become more expensive for consumers to fill their tank, to switch on the light, to open a can of beer or purchase a mobile phone.”

A report published on September 17, 2012 by the United Nation Conference on Trade and Development claims that actions by financial institutions represent 85% of all trading in raw materials. As for the derivative instruments—highly speculative insurance certificates—their total price represents 20 to 30 times the production value of the equivalent raw materials. This report stresses that “financialization is the primary cause of oil and raw material prices being so volatile.”

Economy of Debt

Everything—even poverty caused by the crisis itself—can become a matter of speculation. Thus, household debt has taken on huge proportions, especially in the United States. It has been the way financial capital “solved” the problems resulting from frozen wages: if salaries are not enough, people can always borrow money, so much so that the banks display a great many tricks for offering loans people can’t refuse because the rates seem so cheap—in the beginning!

The famous American mortgage loans which caused the subprime crisis of 2007 were one of the most serious aspects of this economy of debt. The pressures on low-income families that needed to find housing ended up with individual tragedies for hundreds of thousands of evicted families who could no longer make the repayments and whose house was foreclosed by the banks. (Evictions are still taking place today.)

This had its impact on the entire economy. The surge in indebtedness first led to the American real estate crisis, and then, because of the securitization activity incorporating American mortgage debt into debt obligations distributed through all the major banks of the world, the mortgage debt triggered the financial crisis still going on today.

However, mortgage debt is only a part of private debt. If added to the different types of consumer credit, household debt has gone from 65% of American GDP in 1995 to 103% in 2013. This means that finance has increasingly grabbed part of the income of the poorest households. An ever growing share of working class income, especially wages, is dedicated to debt servicing and this also inflates the finance sector.

The national states themselves are getting ever more in debt. In order to help the banks, they had to borrow from the financial markets, that is, from the very same banks to which they were giving money. It has all come full circle: here again the system is self-generating. The more the states are helping the banking industry, the more they tie themselves in debt to the banks. And the states’ debts—the “sovereign debts”—have not only become themselves speculative “financial products,” they also were at the origin of several major waves of speculations, especially those which shook the euro on several occasions.

Taken as a whole, the evolution from financialization to an economy of indebtedness and operating on credit has destroyed the kind of after-the-fact regulation which had characterized the functioning of the capitalist system.

As classical a bourgeois economist as Maurice Allais, a former Nobel Prize winner in economics, gave warnings when financialization was taking off: “No market economy can operate properly if the ex nihilo and unchecked creation of new means of payments can make it possible to escape, at least for a while, the necessary adjustments.” It was a euphemism meaning that even if the constant introduction of monetary instruments by the states and the banking system makes it possible, “at least for a while,” to avoid re-equilibrating the economy through the crisis, it only extends the deadline and makes things worse.

Greater Destabilization

By nature, capitalism is a market economy. With the financialization of economic life, however, financial markets are dominating the economy, and by far. But they make a particularly volatile market, and the multiplying of financial instruments makes it even more volatile. The ultimate is the development of high frequency trading, a computerized speculation giving the opportunity to capitalize on a price variation in split seconds. Recently, computerized speculation almost created a panic on the stock markets—by accident!

Speculative decisions—about currencies, stocks, bonds, state debts or whichever financial instrument—are little more than bets. A mere declaration by the Federal Reserve or the European Central Bank chairmen; a mere political scandal like Berlusconi’s buffoonery; a mere mood swing on financial markets based on interpretations of tweets are all leading to more or less violent jolts in the economy.

The 2008 banking crisis was preceded by a series of financial crises and crashes, each time more violent. The banker Jean-Michel Naulot listed the following in his book: “October 1987 stock market crisis, real estate crisis in the beginning of the 1990s, February 1994 bond crash, 1998 British Barings bank crash, and LTCM bankruptcy (hedge funds) on the verge of becoming a widespread stock market crisis, 2001-2003 dot-com crisis, 2007-2009 crash caused by subprime loans, and from the winter of 2010, the euro crisis.” He went on to say: “Since 2000, the world has been living through crashes half of that time, meaning it has been going through the fear that the world financial system should collapse, with all its consequences for the real economy.”

The culminating point of these financial jolts was reached in 2008 when money almost stopped circulating between banks because they no longer trusted each other, which put the banking system on the verge of collapse. Fearing the risk of a comparable collapse to that of 1929’s Black Thursday, all the states responded by providing the banks with colossal reserves to restart the system. It took them several months to do so. They succeeded in preventing the overall collapse, but all economic activity has been suffering since then from backlashes to the states’ actions. The banking crisis started what was called the “Great Recession” in the United States because it lasted for eighteen months, the longest period since the Great Depression that had followed the 1929 crisis.

Pumping money into the system has never stopped since September 15, 2008, when banking colossus Lehman Brothers went bankrupt. After putting more than two trillion dollars into the financial system on September 15, 2008, then a similar amount on November 2, 2010, the American central bank justified its policy of granting constant aid by the need “to avoid the collapse of banking companies and to restart the economy.”

This policy succeeded beyond all the bankers’ expectations—on the first point. But it failed miserably on the second point, that of restarting the economy. This policy consisted, at the U.S. Federal Reserve, of bringing the interest rate for credit to a historic low (0.25%). This meant lending the banks, almost for free, money they themselves were then able to lend again with a profit. Furthermore, the Fed is still massively buying up securities from the banks, included junk mortgage bonds, and it is handing out 85 billion dollars a month to do it.

The European Central Bank (ECB) is doing the same. The main difference between the ECB and the American Fed is that the European treaties and above all the diverging interests among the 17 states of the Euro Zone prevent the use of some procedures used by the Fed. But the European political and economic leaders, helped by an army of lawyers, manipulate the ECB treaties and regulations so that, even with some delay, they did what finance was asking.

Drawing the balance sheet of the five years since the crisis of the banking system, the French daily Le Figaro calculated on September 23 that the imperialist countries’ central banks had rounded up five trillion dollars “to save the banks.” And this conservative newspaper added with some sense of reality: “the collapse of Lehman Brothers started a tremendous crisis for world capitalism and its outcome will take about a decade for full employment to come back and for de-leveraging the states (a quarter of a century and a world war were needed to overcome the great deflation).”

Panic-stricken, the state leaders who gathered for a G20 meeting following the banking crisis declared that it was no longer possible to leave the dozen major banks that dominate global financial life with free hands. They proclaimed that these banks must be regulated because they are a serious threat to the whole economy. Nothing remains of these crucial commitments. Except for some legal troubles for a few traders caught redhanded and turned into scapegoats by the banks, and except for the conviction of a few swindlers like Madoff whose mistake was to rob his own peers, few measures were taken to regulate the situation. Among other things, banks are now expected to have a little more capital on reserve than before, as if that were enough to let them face a massive speculative wave! And the few measures that were imposed as warnings can easily be reversed—especially since the regulating bodies come from the banks themselves, being, at the same time, judge and jury and the accused!

Besides, these regulations affect only banks officially recognized as such. But even before the crisis, there already was, alongside the banks, a thriving “shadow banking” system, that is financial institutions not subjected to the banking regulations. This shadow banking, and in particular the hedge funds (speculative equities), were severely hit by the collapsing of subprime securitization in 2008. Some of the hedge funds went bankrupt. But the amounts handled by those that are left still represent the equivalent of the American GDP. According to the FSB (Financial Stability Board), the overall amount of capital handled in the United States is distributed as follows: 22% in the banks, 27% in the insurance companies and the pension funds, 11% in public financial institutions, 5% in the central bank, and 35% in “shadow banking.”

Differentiating between regulated banks and uncontrolled banks is, however, useless. They are not only closely linked, they also form the two forms under which the same financial conglomerates live. One of the main points the bankers make through their spokespersons is that this regulation will only lead to moving equities from law abiding banks… to “shadow banks.” In fact, all the banks are “shadow banks” from the point of view of the population. The only solution to clear the shadow is to lift all banking secrecy.

The only way to regulate the banking system is to expropriate the owners and shareholders and to collectivize the whole system under the control of the population.

The Balance Sheet Is Clear

The balance sheet of the past five years since the beginning of the financial crisis is clear: the huge amounts pumped into the financial circuits by the states have increased speculative transactions on an enormous scale. Here are a few significant examples: according to an inquiry by the BIS (Bank of International Settlements), more than four trillion dollars were being exchanged each day on the stock market in April 2010. Three years later, the amount had reached 5.3 trillion dollars. This amount is out of proportion with the total amount of international trade for goods and services. “In the middle of the 1970s, the volumes on the exchange market represented about 20% of the world GDP (that is a fifth) (…) Today, volumes on the exchange markets are reaching 15 times the world GDP and 65 times world trade, even though their main purpose is to enable the exchange settlements and the connected risks” (Naulot).

Here is another example: “Global stock capitalization has gone from a little bit less than nine trillion dollars at the end of 1990 to 57 trillion dollars at the end of 2010.” Only an infinitesimal portion of this incomprehensible amount goes to developing production! Which leads Naulot to say: “The connection between finance and the real economy is in some respects more preoccupying than during the 1920s. Economy works globally, and the mass of capital has no relationship with what we knew in the past, neither in terms of its amount nor the speed of cross-border circulation. And so many distortions have been accumulating during those past thirty years and more precisely the past fifteen years.”

What a worrying analysis! Especially since finance is a part of the “real economy” of today’s capitalism. And this is precisely what is bringing capitalism’s evolution to a dead end!

Production is still stagnating in the European countries and in the United States. With short-lived ups and downs, unemployment has gone up and the amount of circulating money is unprecedented. Unprecedented also is how volatile the financial markets are.

Even according to official figures, productive investments have receded by 1.2% in 2012, and they will recede again by a similar proportion in 2013.

During these five years, the economy went through a new financial crisis. The recurring crisis of the euro bounced back, both in Greece and in Cyprus, and it threatens to bounce back in some other countries.

Recently in May 2013, the emerging countries were nearly severely hit when Fed chairman Ben Bernanke let it be understood—understood, nothing else!—that the American central bank was getting ready to slow down its “quantitative easing” policy, that is, slow down the printing of still more dollars to buy up some of the federal debt and buy out some of the mortgage loans to the banks. This mere threat, which Bernanke soon withdrew, was enough for some American capital invested in Brazil, Indonesia, Turkey, etc. to be repatriated to the United States, shattering these countries’ currencies. It was understandable they took the threat seriously, given the way the 1929 American financial crisis spread to other countries—and in particular to Germany, one of the most severely affected countries by that crisis.

This policy favoring the financial system has another severe consequence: inflation of the central banks’ balance sheets. The U.S. Federal Reserve’s balance sheet went from 5% to 20% of the American GDP between 2006 and 2013. “The balance sheet of a central bank had never gone through such a tremendous inflation,” according to a major bank analyst.

The financial world well knows that among the securities the central banks have bought from the banks, there is a big proportion of junk bonds. The central banks themselves are becoming more vulnerable to speculation. This can only intensify speculative movements, as the financial world is betting this time on how reliable the central banks are and consequently on the currencies they create.

To maintain the financial system in constant intensive care, as the central banks of all the imperialist countries have done, means to empty the states’ coffers. The states are dedicating an increasing part of their budget to pay back their debts and the interest on them. While the central banks loan money to the banking system almost for nothing, the banking system, and more generally this famous financial market dominating the economy, loans money back to the states based on how much the financial market thinks the states can service their debt—and the market sets the rates on which it will lend to the states accordingly.

Pretending it is necessary to repay their debts first, every country is imposing more or less brutal austerity policies on the population, the consequences of which are everywhere the same: less money spent on public services useful to the population and fewer public workers, including in indispensable sectors such as health and education. Under the pretext of repaying state debts, every government tries to drum into people’s heads, as if it were an indisputable truth, that the taxes that weigh mainly on the laboring classes must be increased. Under this same pretext, they require that the most vital public services sectors must show a “profit.”

As varied as the different ways to get money out of the population may be, their class significance is clear: they are creating a colossal transfer from the exploited classes to finance capital, that is, to the very top bourgeoisie.

This colossal “financial pump” is self-fueling. On October 17, 2013, under the title “The Euro Zone Still in the Spiral of Debt,” the French economic newspaper Les Echos noted that the states belonging to the Euro Zone will have to borrow between 850 and 900 billion euros from the markets next year in order to pay their debts.

It also noted that “while budget deficits are getting smaller, the amounts for past debt payments are going to get bigger.” What does this really mean? Imposing a more or less draconian policy on the population in order to reduce the budget deficit, the states may not need to borrow as much in the future, but the burden of interest owed on past debts will become heavier and heavier. Les Echos cited Germany as a prime example, even though its financial health is supposed to be “particularly flattering.” Berlin will issue only six billion euros in new debt, but it will have to borrow 150 billion euros to pay back earlier debts!

No matter how great the sacrifices imposed on the exploited classes in the past may be, pressure on them can only increase.

Aggravation of the Crisis

This financial pressure on the poorest classes is leading towards an aggravation of the economic crisis.

The fundamental cause of all economic crises is the disproportion between the lack of income allowing the working class to buy (that is, solvent demand) and the amount of goods and services the capitalist companies could produce. As they devote more of their budget to service their debt, the states help lower the consumption capacities of the working classes; that is, the states help limit the market even more.

The role of finance, and more precisely of the banks, is to “socialize capital,” that is, to direct it towards capitalist production, to allow a continuous reproduction of capital. It has been a long time—since the development of imperialism—that banks no longer are modest intermediaries in the process of production. Rather, financial capital merged with industrial capital is dominating all economic life. Lenin described how financial capital and the monopolies merged with the capitalist state, thus subordinating the state to the kings of finance.

This merger, reinforced by increasing financialization, is taking on new meaning. The capitalist state is more and more doing the dirty work for big capital. In order to save and increase its profits, big capital uses the state, with all the means it has, to grab whatever it can from public finances to round out the direct profits coming from exploitation. The parasitism of big capital today is unprecedented.

Many economists, who place themselves within the framework of the capitalist economy—i.e. from the point of view of the bourgeoisie—note the contradiction between these austerity policies and the additional obstacle they represent in the way of any economic recovery. Some also observe that the endless spiral of state debt and the necessity to service it will necessarily come up against the inability of some states to repay their debts. The more their debts increase, the more expensive their borrowing from the financial markets will become.

This latest threat convinced the states to set up a European mechanism for stability (EMS), an emergency fund meant to replace the European Financial Stability Fund, whose main objective was to finance the rescue plans for near bankrupt states—in other words, to ensure the banks they will get their money back even in the case of a state unable to pay its debts because it has been pushed by the very banks towards bankruptcy through debt.

In order to ensure the constant transfer of wealth from society to the major banks, all of the exploited classes of the Euro Zone will be asked to contribute. Despite the huge amounts this latest mechanism will have—some 700 billion euros—it will not be able to deal with a default by a state the size of Spain or Italy.

This “European Mechanism of Stability” is, first, a way to pool together the obligations the states of the European Union have to the banks. It is also a new field of activity for the banks, since the EMS will get its funds from issuing bonds on the financial market. On October 9, under the title “New EMS Voted in by Investors,” Les Echos observed that subscription to the first part of the bonds to be issued reached 21 billion dollars within 45 minutes. Clearly, the banks prefer relying on the security of a European institution, rather than on the Greek or Irish states. And this EMS also broadens the opportunities for speculation.

Despite this financial patch-up job, the Euro Zone remains the potential source for launching a still more serious financial crisis than we have seen up until now.

If the ECB, the IMF and the leaders of the main imperialist countries of Europe have succeeded up to now in bridging the gaps (in countries like Greece, Ireland and Cyprus), they did not change anything about the fundamental problem: that is, although a single currency indeed exists in the Euro Zone, there is no unified state. The Euro Zone is a conglomerate of different states, each with its own fiscal policy, its own economic policy, its own wage scale and each one defending above all its own bourgeoisie’s interests, which may… or may not coincide with those of the other bourgeoisies!

The only supraEuropean power which has emerged from the various crises is the European Central Bank (ECB), which is becoming more and more independent from the states. But there are narrow limits to its independence. In fact, the ECB’s independence means only that it more and more represents the main imperialist powers of the Euro Zone, Germany and France, against the fifteen others. However, the ECB does not have the power to settle disagreements between these two main imperialist powers.

A currency which is not backed by a state power is doomed to undergo repeated attacks coming from the financial markets, which gamble on the states, by investing or divesting capital, or by moving interest rates up or down.

The United States may be another source from which the crisis could be ignited. The Federal Reserve’s nonstop aid to the banks may be making the financial machinery turn rapidly today—meaning it allows financial capital to reap high profits. But U.S. leaders and their economic advisors know perfectly well that the enormous liquidity pouring into the economy is being directed towards speculation, just as it was before, and that they are consequently fueling the next financial bubbles. Le Monde observed on September 20, “Investments are mainly starting again in the real estate sector—where the new start is only due to the Fed’s aid.”

Clearly, the risk is that new speculative bubbles in raw materials or in the housing market may burst once again, as the dot-com bubble did in 2001-2003 or the real estate bubble in 2007-2008.

The main preoccupation of U.S. leaders is what the press calls “the problem of getting out of the crisis.” How to handle it? Ending the nearly free handout of money to the financial system—won’t this prompt the banking cataclysm the states have been trying to prevent by pursuing that policy? Nobody knows today, and especially not the leaders of economic life, how the United States can square the circle.

The alarm of the bourgeoisie, its bankers and its intellectuals, facing their monstrous economy and the threat it contains, is commensurate with the severity of the crisis.

The most radical among the economists who influence the antiglobalization circles and who are in favor of an alternative policy within the capitalist framework are dreaming of capitalism freed from financialization or at least from some of its consequences. The debt cancellation for such-and-such poor country has been for a longtime a part of the demands they put forward. Some, like Graeber the economist, take this idea further, calling for a worldwide debt moratorium. He demands a “Jubilee,” alluding to a public ceremony of the Jewish faith, during which “debts were cancelled, inheritance given back to the owners, and slaves set free.” In reality, the European banking system had to take this path, reducing part of the Greek debt, for even the most brutal loan sharks know that it is better not to kill the debtor!

But if there has been some debt cancellation in the recent history of world capitalism, the idea of its generalization is absolutely utopian within the framework of a capitalism in which financial capital merges with industrial capital and where the profiteers are the same people.

No matter how important the financialization of the economy might be in today’s capitalism and how heavy the increasing levies of finance on the overall surplus value, what really matters for the working class is this fundamental fact: surplus value, no matter who gets it, comes from exploitation.

The Only Way Out

A long time ago, in a text she wrote on the “Stagnation and Progress of Marxism,” Rosa Luxemburg said that as far as the class war is concerned, “the fundamental theoretical problem is the origin of surplus value, that is, the scientific explanation of exploitation; together with the elucidation of the tendencies toward the socialization of the process of production, that is, the scientific explanation of the objective groundwork for the socialist revolution.” And, she added: “The workers, being actively engaged in the class war, have no direct interest in the question how surplus value is distributed among the respective groups of exploiters; or in how the different exploiters rob from each other, competing for the surplus value produced in production.”

In order to put an end to the total power of finance, something more than changing today’s operating rules of capitalism is required. It’s necessary that the “class war” of the proletariat, pushed up to its end, overthrows the relationships of production; that the proletariat takes power and expropriates the bourgeoisie. A new economic and social organization can emerge only through the destruction of capitalism.

The most lucid economists from the bourgeoisie’s point of view, even those best disposed towards the victims of this system, run up against the metal wall of their own class choices. Only the revolutionary class, mobilized within the framework of a revolution and highly conscious of society’s interests, can make the banking system, the bankers—that is, the bourgeoisie—do what they will not do of their own accord: get out of the way. It is through the seizing of power that the proletariat can begin the social revolution which will put an end to private property in the means of production, and to everything ensuing: the markets, competition and finance domination.

Talking about the objective conditions for the social revolution, Trotsky proclaimed in the “Transitional Program”: “The objective prerequisites for the proletarian revolution have not only ‘ripened’; they have begun to get somewhat rotten.” Fascism, world war, “midnight in the century”—these illustrated at that time how rotten capitalism had become.

Capitalism was able to bounce back, at the price of 60 million deaths in World War II, and maybe more. It is now sinking again into rot.

“The turn is now to the proletariat, i.e., chiefly to its revolutionary vanguard,” added Trotsky. Rebuilding this revolutionary vanguard, giving the consciousness of its historic task back to the working class, and giving it back confidence in its capacity to carry out that task is, as in Trotsky’s time, the only way to get out of the stalemate in which capitalism has locked humanity.